As part of the government’s drive to improve the tax system in Nigeria and increase the nation’s internally generated revenue, the Minister of Finance towards the end of 2016 set up a committee to review Nigeria’s National Tax Policy document of 2012 and proffer solutions for its practical implementation.
The outcome of the committee’s work was the revised National Tax Policy (NTP) which was approved by the Federal Executive Council in February this year.
The NTP provides guidelines for the orderly development of the tax system in Nigeria, hence tax legislation and administration should be carried out in accordance with the NTP which is also to serve as a reference point for all stakeholders in taxation.
A review of the NTP shows that it runs through the gamut of the Nigerian tax system setting out the guiding principles of the system, the responsibilities of stakeholders, provisions for tax administration and for the implementation of the policy.
The NTP outlines the responsibilities of the stakeholders in tax matters. An important responsibility on the part of the government is to ensure a reasonable transition period between three to six months before implementation of a new tax. The tax payer, on his part, has a duty to raise his objections to decisions and assessments timeously and is entitled to receive prompt, courteous and professional assistance in dealing with tax authorities. Revenue agencies are obliged to undertake timely audits and investigations while the professional bodies, practitioners, consultants and agents must not aid and abet tax evasion and corrupt practices. It is also interesting to note that the NTP saddles media and advocacy groups with the responsibility of ensuring that aspiring political office holders understand the NTP and are able to articulate their plans for the tax system.
In the area of dispute resolution, the NTP recommends arbitration as a means of resolving disputes between tax authorities and relevant stakeholders. Certainly this indicates a departure from the judicial position that tax disputes are not arbitrable.
As a means of ensuring implementation of its recommendations, the NTP mandates the Executive arm of government to sponsor a Bill for the establishment of a tax court as an independent body to adjudicate in tax matters and proposes the review and amendments by the Minister of Finance and Nigeria’s federal legislature of various tax regulations and laws.
One of the significant recommendations is the immediate repeal of the Value Added Tax (VAT) Act, and its replacement with an entirely new VAT Act which would be aligned with global best practices to avoid double taxation and double non-taxation. The NTP posits that considerations should also be given to a progressive VAT system hence there should be a higher VAT rate for luxury items such as cars, planes, jewellery, but an expansion on exemption on basic food and other items considered to be essential to the poor.
With respect to the Companies Income Tax Act (CITA), the NTP advocates the removal of the exemption from minimum tax of foreign companies with at least 25% imported equity capital on the basis that it is discriminatory against Nigerian companies.
The repeal of the Stamp Duty Act (SDA) on the basis that it is outdated same and unfit for purpose is a highlight of the NTP. The policy document goes further to recommend the enactment of a new SDA which will specify the specific instruments that will be stamped and the rate of the duty.
Other laws should also be enacted to cover areas where no specific legislations exist, such as the taxation of Real Estate Investment Trusts (REITs).
In all, the NTP is a lofty but laudable policy framework. Continued sensitization of stakeholders and active and unrelenting implementation of the policy will certainly be required to put Nigeria on the path of a more efficient and fairer tax system.